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Optimization Squared: The Future of Supply Chain Leadership Lies in Tightly Merging and Optimizing the Warehouse and Transportation Functions

Over the past few years, agility has become one of the few mantras of supply chain leadership. The economic downturn taught us that in order to succeed, companies must focus on speed, sustainability and adaptability, while also performing at a high level and keeping costs low.

For those familiar with the supply chain industry, you may find yourself scratching your head and asking, “Which part of the process should we focus on?”

With the technology evolution growing so rapidly in various segments, executives are at loss as to where they should focus their attention. The answer to that question might start by paying particular attention to warehouse management and transportation management.  While many leading companies have already implemented process improvements in both these areas, the real challenge lies in bringing them together and optimizing their shared capabilities.

To achieve this synergy and optimize these shared resources, companies must first ensure that management from both entities has concurrent visibility and transparency to demand.  Secondly, companies must work towards achieving a concept known as the “perfect load”. The perfect load is the “load that maximizes routing by aggregating many different kinds of transportation demand.” In essence, companies that understand and utilize a perfect load are able to create and maximize transportation and warehouse efficiencies while minimizing their carbon footprint. Efficiencies in areas such as containerization and scheduling will enable companies to not only achieve agility, but also reduce costs and become green at the same time.

Conceptually, every supply chain company should be implementing “the perfect load;” but it is not that simple to turn this theory into reality. How exactly can we achieve this “perfect load?” How do we create visibility between warehouse and transportation management to achieve efficiencies and reduced costs? One of the answers lies in technology: technology tools that will enable real-time information sharing and strategic process coordination within companies. Tools that can provide transparency across different departments will enable groups to align themselves accordingly to real-time information and data.

If you think about it, warehousing and transportation are not glamorous segments within the supply chain by any means. Which in my opinion, is all the more reason for companies to analyze their existing technology and software tools to determine if there is a more effective and integrated manner for these departments to perform their jobs; such as by enabling real time data sharing and inventory visibility.

Many companies across various sectors are optimizing these two areas, where does your company stand?  

 

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Interview with Michael Cherney of Load Delivered Logistics

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Michael Cherney is Director of West Coast Operations at Load Delivered Logistics, a fast-growing third-party logistics provider that provides truckload transportation services to supply chains of all sizes. During his time at Load Delivered, he has specialized in helping companies in the foodservice, retail, and bottled beverages industries manage their logistics.

What are some of the more pressing issues supply chain managers are facing today? And how is Load Delivered Logistics hoping to counteract this?

One of the most pressing issues that we are facing is a shortage of drivers which in turn means fewer trucks on the road. What Load Delivered (LD) does provide is a greater reach than an asset based truck company could. A company that owns their own trucks is limited to servicing all that their trucks can service where LD has relationships with 3000 truck companies and can provide trucks all across the country. There are a lot of times where an asset based truck company will make commitments to companies of all sizes and due to this driver shortage, be unable to honor the commitment. LD will then come in and provide a truck from their network to help service that customer’s customer and keep everyone happy.

What countries or regions do you see as becoming more important to global supply chains?  

One of the biggest and most impactful regions in the entire continent is California. The produce market and the harvest season creates an huge disruption in the North American freight market. Outbound costs skyrocket to more than 50% or double normal costs, and it creates a shortage of capacity all across the country. So California really dictates higher market prices all across the United States.

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Apple and Ethical Sourcing… Who pays?

A few weeks ago, Apple released their quarterly smelter list. This document attempts to provide an accounting of all the smelters in Apple’s supply chain. Even if your supply chain is small and simple, tracking down the source of each mineral of each component in your product would be a difficult task; for a chain as broad and complex as Apple’s is, it must be nearly impossible.

But still, they try. By publishing this list, Apple hopes to move us closer to a world where every iPad and iPhone is certified to be completely free of conflict. This is an important goal, but progressing towards that goal—tracking down all those smelters, assessing their practices and ultimately ensuring that all parties involved are treated fairly—will undoubtedly be expensive. Who will put in the legwork? Who will ultimately shoulder the costs? Who SHOULD shoulder the costs

What do you think?

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Supply Chain Challenges for Automotive Growth in Mexico

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Today’s post is authored by Mike Nelson. Mike has been involved in the automotive industry for over 40 years. He recently retired after his 19th year at Toyota, where he had responsibility for all Rail Contracts, Strategy and Operations for Toyota Logistics Services, Inc.

Mexico is poised to take over the leading role in the importing of automobiles and trucks into the US and Canada.  Currently at about 18% of all North American production, it is expected that Mexican production could surge to over 25% within the next 5 years.   A major factor in this growth is Mexico’s embrace of free-trade agreements which now includes over 44 countries, in addition to its historically low labor costs.  The increase in automotive production is being led by the new plants being opened by Honda, Mazda, Volkswagen, Nissan, and Audi, as well as expanded production in existing manufacturing facilities from the Detroit 3. This growth will lead to monumental challenges in finished vehicle transportation to move these increased volumes from Mexico to the US and Canadian markets.

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Center director Nick Vyas has been interviewed by Dustin Mattison of the Kinaxis Supply Chain Expert Community. The interview touches on a number of trends Nick sees as impacting supply chains in the next decade. What do you think? What trends do you expect to impact your industry?

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Risk Pooling, Late Customization and Product Commonality

This guest post is one of a series on risk pooling and its implications. It was authored by Professor Hiroshi Ochiumi, Assistant Professor of Clinical Data Sciences and Operations at USC. Read more about Professor Ochiumi.

The new Apple Mac Pro packs a great amount of features in a very small space. One reason Apple was able to do it is the way the Mac Pro handles the heat. Computers, particularly the powerful ones such as the Mac Pro, generate a lot of heat. Traditionally, computer makers put a heat sink on the CPU, GPU, and other parts to distribute heat. Then they have to design airflow so that there is enough air to cool the heat-generating parts. A typical PC has multiple heat sinks and fans in it. Apple designed the new Mac Pro with just one heat sink, which they call a thermal core. Instead of multiple heat sinks and fans, the new Mac Pro has one aluminum triangular prism in the center, with the CPU board and two GPU boards on the three sides.

How can Apple make the Mac Pro smaller by having just one piece of heat sink (or thermal core) instead of many?

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Supply Chain Talent Gap Big Opportunity for Trained Professionals

In an article in Supply Chain Management Review, Kusumal Ruamsook and Christopher Craighead of Penn State predict some big changes in the supply chain talent market. In a nutshell, Ruamsook and Craighead see four supply chain trends coming together to create a talent crunch in the near future:

  1. Demand for talent in the supply chain is increasing.
  2. Experienced baby boomers are retiring.
  3. The skills required to be successful in the supply chain profession are changing.
  4. There may be a shortage of supply-chain focused business faculty.

The article is well worth a read regardless of whether you’re a supplier or consumer of supply chain talent. If you run a business that relies on effective supply chain management—that is, almost any kind of business—this report should make you nervous. But if you’re a supply chain professional who is willing to stay engaged and keep learning, this report should make you salivate.

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Join the Masters in Global Supply Chain Management class on their trip to Singapore in the Center’s Inaugural Newsletter

The USC Marshall Center for Global Supply Chain Management is pleased to announce the publication of the Center’s inaugural newsletter. In this issue you can read all about the first cohort in the Masters in Global Supply Chain Management as they journeyed to Singapore to get first-hand knowledge of supply chains in Asia.

Click the image below to download!

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Real-Time Optimization of Personalized Assortments

By Negin Golrezai, Hamid Nazerzadeh,  and Paat Rusmevichientong, Marshall School of Business

Online commerce has been growing at an astronomical rate over the past decade, led by Amazon.com, partly at the expense of brick and mortar retailing. An important advantage of online retailing is the ability to change the assortment of products displayed (offered) frequently and instantaneously. In fact, the assortment offered can be unique and tailored to a customer’s browsing history, demographic characteristics, etc. Furthermore, on the supply side, the assortment offered can be altered in real-time depending on the availability of different SKUs. Going one step further, an online retailer may want to fine-tune the assortment of SKUs not only based on current inventory but also based on the likelihood of future demand for those SKUs. A procedure that offers a real-time, personalized assortment of SKUs to online customers with unique preferences that maximizes the retailer’s revenues may seem like a utopia. In fact, Marshall faculty and a doctoral student (Negin Golrezai, Hamid Nazerzadeh, and Paat Rusmevichientong) have gone one step further and developed a procedure that determines such an assortment which not only maximizes revenues but also takes into account inventory availability. In recent research, a relatively simple but provably powerful and robust algorithm has been developed to solve this important problem faced by online retailers.

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